A query on export or import of Service

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Yerriswamy C

Partner

21 Points Posted on 03 October 2010

Please Answer my query...

We are the exporters of iron ore. After we export, at the destination port, we will appoint an agency for sampling the iron ore to find out its quality [Fe Content]. After the sampling was over, the service provider will rise a bill on us in foreign currency and the service provider is not collecting service tax. Now the audit party objected that, the said service is chargeable under revese mechanism as imoprt of services and asked us to pay the tax on the same.

Here the service provided and received is outside India. But the service receiver is in India.

Please clarify whether the said transaction is taxble under service tax provisions.

Replies (4)

Madhukar N Hiregange

Chartered Accountant

33545 Points Posted on 04 October 2010

Originally posted by : Yerriswamy C

Please Answer my query...

We are the exporters of iron ore. After we export, at the destination port, we will appoint an agency for sampling the iron ore to find out its quality [Fe Content]. After the sampling was over, the service provider will rise a bill on us in foreign currency and the service provider is not collecting service tax. Now the audit party objected that, the said service is chargeable under revese mechanism as imoprt of services and asked us to pay the tax on the same.

Services provided and recived outside India are not under the jurisidction of India. Orient crafts case of MP HC indicates the same. Only how you can prove that the same is actually recived outside India is an issue.

Here the service provided and received is outside India. But the service receiver is in India.

Please clarify whether the said transaction is taxble under service tax provisions.

U S Sharma

glidor@gmail.com

21670 Points Posted on 21 December 2010

64. Extent, commencement and application.

(1) This Chapter extends to the whole of India except the State of Jammu and Kashmir.

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

(3) It shall apply to taxable services provided on or after the commencement of this

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in your case the sampling is done to satisfy the customer needs, not of yours, as you have exported the materials in due conformation with indent/order.

However the reports are needed by client to discharge the materials from port, as u have nothing to do after getting the certificates, but as per the order terms u have to depute a testing agency of client's own country to test and certify the same.

Mere payment of these bills does not comfirm the "import of services" and on other hands where the teritory of service tax is over india except J&K, how they can judge the services received by us or the party?

Guest

Posted on 21 December 2010

DEPENDS UPON BY WHOM THE BILL IS RAISE :- AS IT SPECIFIED THAT SAMPLING IS DONE BY THE SERVICE RECEIVER OR PROVIDER IF THE SAMPLING IS DONE BY THE RECEIVER THE AUDIT PARTY IS RIGHT HOWEVER IF SAMPLING IS DONE BY THE IMPORTER I.E. PERSON SAMPLING ,

SO THE AUDIT PARTY IS RIGHT AND ITS A IMPORT OF SERVICE AS SAMPLING IS DONE AFTER IMPORT IS COMPLETED AND BILL IS RAISE BY THE PERSON OUTSIDE INDIA ON THE PERSON RESIDING IN INDIA , IT DONT MAKE ANY DIFFERENCE WHEATHER ITS A UNDERSTANDING BETWEEN PARTIES TO DO SAMPLING OR NOT